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Financial Action Task Force

  • Category
    Economy
  • Published
    28th Feb, 2019

During the Financial Action Task Force (FATF) Week in Paris, India had lobbied hard to get the global financial body to blacklist Pakistan for non-compliance in curbing terror financing.

Context

During the Financial Action Task Force (FATF) Week in Paris, India had lobbied hard to get the global financial body to blacklist Pakistan for non-compliance in curbing terror financing.

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  • Indian security agencies have prepared a dossier to show the culpability of Pakistan in the Pulwama terror strike, which was the worst such attack in J&K in decades.
  • Pakistan was placed on the 'grey list' in June last year and was lobbying hard to be removed from this list at the meeting.
  • Pakistan has to complete its action plan until May 2019. If the country does not meet the targets by October, it could be blacklisted.

FATF

  • It was established in July 1989 by a Group of Seven (G-7) Summit in Paris, initially to examine and develop measures to combat money laundering.
  • In October 2001, the FATF expanded its mandate to incorporate efforts to combat terrorist financing, in addition to money laundering.
  • Since its inception, the FATF has operated under a fixed life-span, requiring a specific decision by its Ministers to continue.
  • The current mandate of the FATF (2012-2020) was adopted at a Ministerial meeting in April 2012.
  • Its secretariat is housed administratively at the OECD.
  • FATF was not formed as a formal international organisation. Rather, the FATF is a task force composed of member governments who agree to fund the FATF on temporary basis with specific goals and projects.

Objectives of the FATF:

  • To set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system.
  • To monitor countries' progress in implementing the FATF Recommendations; reviews money laundering and terrorist financing techniques and counter-measures;
  • To promote the adoption and implementation of the FATF Recommendations globally.

How many countries are there in the FATF?

  • The FATF, which reportedly comprises 36 countries and two regional organisations (European Commission and Gulf Cooperation Council), works to identify national-level vulnerabilities with the aim of protecting the international financial system from misuse.

What are the Black List and Grey List?

Those are two types of list that FATF maintains.

  • Black list is given to the countries that FATF considers as uncooperative tax havens. These countries are known as Non-Cooperative Countries or Territories (NCCTs).
  • Grey list is a warning given to the country that it might come in Black list. But even when a country comes under Grey list it faces many problems like :
    • Problem in getting loans
    • Economic sanctions
    • Reduction in trade.
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